Finance delays full US repayment

South Canterbury Finance (SCF) has announced it will repay a US$100 million loan to US lenders over the next five and a half months and that the unwinding of foreign exchange hedges around this US Private Placement will provide cash for the Timaru-based financier.

SCF said it was also close to finding a replacement lending facility of NZ$75 million with a third party to replace an unused NZ$100 million bank lending facility that was cancelled by mutual agreement with local banks. The new facility would be effective over the next week, it said.

Earlier on Thursday, trading in SCF bonds was halted on the NZX ahead of the announcement about how South Canterbury would resolve the withdrawal of the US Private Placement.

The trading halt was lifted after the close of trade on Thursday.

The US lenders in the private placement had the right to withdraw their funding afterSouth Canterbury's credit rating was reduced to a sub-investment BB+ from an investment grade BBB- by Standard and Poor's in August.

South Canterbury said it was still working on a capital restructure and gave no timetable for an announcement. It also did not give a timetable for the re-registration for its prospectus.

South Canterbury needs a significant capital injection if it wants to have any hope of keeping its BB+ credit rating and extending its government guarantee from October next year.

Earlier the Otago Daily Times reported the US private placement issue cast a pall over South Canterbury's efforts to re-register its prospectus.

SCF released its audited annual report for the year ended June 30, 2009 earlier this month, revealing that its banks had turned off an unused NZ$100 million lending facility to the finance company while it hunted for new capital.

The annual report also included an opinion from SCF's auditors, fellow Timaru firm Woodnorth Myers & Co, that there was a "fundamental uncertainty" about South Canterbury Finance's status as a 'going concern' because of the risk that US lenders may withdraw a US$100 million private placement in the wake of South Canterbury's downgrade to a sub-investment grade BB+ credit rating by Standard and Poor's.

- INTEREST.CO.NZ